Vietnam State Bank Guides Intermediary Payment Services under Circular 23

In recent years, digital wallet have been a trend in fintech because of the competitive development from the foreign investors to banks in Vietnam or of large technology companies and corporations which are also gradually entering the financial technology market to challenge the conventional banking in Vietnam.

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In a nutshell, digital wallet, also known as online wallet, is an account of payment for the most popular online transactions such as: payment for electricity, water, tuition, phone recharge, buying movie tickets, etc. The function of the digital wallet is operated by linking a bank account, adding money to the wallet and paying for any associated services in a simple and convenient way.

Besides the benefits, digital wallet could also bring possible negative impacts and obstacles in reality. The State realizes the matter and has recently issued policies and regulations on the management of intermediary payment services in Vietnam in order to achieve economic efficiency. On 22^th Nov in 2019, the State bank of Viet Nam promulgates the Circular No. 23/2019/TT-NHNN amending, supplementing some articles of Circular No. 39/2014/TT-NHNN on 11^th Dec in 2014 guiding the intermediary payment services.

One of the new points of the Circular is the regulation on amending and supplementing of the provision of digital wallet. Firstly, when opening a digital wallet, customer must provide, update fully and accurately the information in the digital wallet opening file to providers of digital wallet services and take responsibility for the truthfulness of the provided information; providers of digital wallet services are responsible for checking, comparing and ensuring that the customer’s application for opening Digital wallet is complete, valid and must request customer to complete the linking of Digital wallet to their payment accounts or debit cards which was opened at associated bank before they use Digital wallet. Customer are allowed to associate Digital wallet with one or many of their payment accounts or debit cards (Digital wallet owner) which was opened at associated banks. It can be seen that this new regulation is reasonable, because Digital wallet are a non-cash payment method. Therefore, banks need to have specific information of users to avoid situation of one person opening multiple Wallet accounts for illegal purposes.

Secondly, money to Digital wallet must deposited from: (i) Customer’s payment account or debit card (Digital wallet owner) at the bank; (ii) Receiving money from other Digital wallet opened by the same Providers of Digital wallet services. Customers can use Digital wallet in order to: (i) Payment for legal goods and services; (ii) Transfer money to other Digital wallet opened by the same Providers of Digital wallet services; (iii) Withdraw money from Digital wallet back to customer’s payment account or debit card (Digital wallet owner) at the bank. One of the most remarkable thing is the new regulation on the total limit of transactions via personal Digital wallet of 01 customer at 01 Providers of Digital wallet services (including transactions of payment for legal goods and services and money transfer from Digital wallet to other Digital wallet opened by the same Providers of Digital wallet services) with maximum of VND 100 (one hundred) million in a month, except for personal Digital wallet of persons having contracts / agreements acting as payment acceptance units with Providers of Digital wallet. For organizations, the State Bank does not set the limit for Digital wallet transactions. The regulation of transaction limits for Digital wallet aims to minimize the risk of taking advantage of money laundering, gambling, and performing illegal activities that have been already difficult to manage.

Finally, The Circular stipulates the prohibition of using Digital wallet to conduct transactions for money laundering, terrorist financing, fraud, cheating and other violations of law; Prohibition of rent, lease, borrow, lend Digital wallet or buy and sell Digital wallet information; Supplementation conditions on tools of supervision on activities of providing Digital wallet services to the State Bank by Providers of Digital wallet services.

Lawyers in banking andfinancial service advisory desk of ANT Lawyers always follow the development of law, especially in fintech where changes are fast to cope with the development of technology and market demand, to provide update to its clients.

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Investment Capital Account of Foreign Investors in Vietnam

According to Vietnam laws, any transaction relating to direct or indirect investment operation of foreigner must be implemented by an investment capital account opened in a licensed bank which is commercial bank or branch of foreign bank permitted to trade and supply foreign exchange service according to legal provisions. It is imperative that, the foreign exchange control in Vietnam is strictly regulated, it is suggested the investors whom invest in Vietnam to consult with banking lawyers in Vietnam to receive legal advice on transaction in the activities of investment through direct investment or M&A transactions.

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In particular, the regulations on investment capital account of foreign investor are set forth in Circular No. 05/2014/TT-NHNN dated on March 12^th, 2014 of the State Bank of Vietnam guiding the opening and use of indirectly- invested capital accounts for implementation of foreign indirect investment activities in Vietnam and Circular No. 19/2014/TT-NHNN dated on August 11^th, 2014 of the State Bank of Vietnam guiding the foreign exchange management for the foreign direct investment in Vietnam.

What is Foreign Direct Investment?

Foreign direct investment in Vietnam means the transfer of capital for investment and participation in the management of investment activities in Vietnam by foreign investors.

The subject matters governed by Circular No. 19/2014/TT-NHNN include residents which are enterprises receiving the direct foreign investment; non-residents involved in the business cooperation agreement in Vietnam; non-residents who are foreign investors of FDI enterprises; organizations, individuals regarding the foreign direct investment in Vietnam.

The invested capital contribution of foreign and Vietnamese investors into an FDI enterprise must be performed in the form of money transfer into the direct investment accounts. In order to perform the foreign direct investment activities in Vietnam, FDI enterprise and foreigner participating in business cooperation contract are entitled to open their foreign currency and Vietnamese dong account of direct investment at a licensed bank.

What is Foreign Indirect Investment?

Foreign indirect investment in Vietnam means the investment into Vietnam by foreign investors through purchase and sale of securities, other valuable papers, contribution of capital and purchase of shares, and through securities investment funds, other intermediary financial institutions in accordance with the law of Vietnam but without direct participation in management of investment activities.

The subject matters governed by Circular 05/2014/TT-NHNN include foreign investors who are nonresidents conducting indirect investment activities in Vietnam; and organizations and individuals who are related to indirect investment activities in Vietnam. It means that this Circular does not govern foreign investors being residents who are foreign organizations and individuals. These subject mattes conduct indirect investment activities in Vietnam according to prevailing legal provisions on securities and other relevant normative legal documents.

All indirect investment activities of foreign investors in Vietnam must be conducted in Vietnam Dong. Transactions relating to foreign indirect investment activities must be conducted through an indirectly-invested capital account opened at a licensed bank.

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